Question: Steve & Barry's Rules the Mall

Steven Shore and Barry Prevor love to fill a void - about 3.5 million square feet of it. That's how much space Steve & Barry's University Sportswear took in U.S. shopping centers last year, the most of any mall-based chain. The co-CEOs soaked up that space by opening 62 supermarket-sized stores, almost doubling their outlets in one year, to 134. The privately held chain, which lures shoppers with casual clothing priced at $7.98 or less-a 40% discount to prices at WalMart Stores Inc. and Target Corp.-plans to operate more than 200 stores by yearend. How can Steve & Barry's charge so little? One reason: the cut-rate deals it negotiates with landlords. Most of its stores are in middle-market malls, which have seen rising vacancies. Low rents are hardly the only way the men keep costs low. While malls usually give new tenants allowances of $20 to $30 a square foot to build interiors, the popularity of Steve & Barry's has allowed the chain to command [allowances] as high as $80, considerably more than actual costs.

Steve & Barry's also saves money in purchasing. It buys direct from overseas factories, like many others, but cuts costs by accepting longer lead times. It also saves by offering steady production throughout the year rather than seasonal rampups. The chain cuts expenses further by deft navigation of import quotas and duties. That's why it buys more from factories in Africa and less from China than many rivals-most African countries face neither U.S. quotas nor duties. Advertising isn't an expense Steve & Barry's wrestles with, either-it relies mostly on word of mouth.

Examining the Newsclip Question

1. Summarizing How has Steve & Barry's University Sportswear cut costs?

2. Making Connections How do the cost-cutting steps help Steve & Barry's increase its profits?